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Taxi Medallion Prices Plummet Under Pressure From Uber
HughPickens.com writes Most major American cities have long used a system to limit the number of operating taxicabs, typically a medallion system: Drivers must own or rent a medallion to operate a taxi, and the city issues a fixed number of them. Now Josh Barro reports at the NYT that in major cities throughout the United States, taxi medallion prices are tumbling as taxis face competition from car-service apps like Uber and Lyft. The average price of an individual New York City taxi medallion fell to $872,000 in October, down 17 percent from a peak reached in the spring of 2013, according to an analysis of sales data. "I'm already at peace with the idea that I'm going to go bankrupt," said Larry Ionescu, who owns 98 Chicago taxi medallions. As recently as April, Boston taxi medallions were selling for $700,000. The last sale, in October, was for $561,000. "Right now Uber has a strong presence here in Boston, and that's having a dramatic impact on the taxi industry and the medallion values," says Donna Blythe-Shaw, a spokeswoman for the Boston Taxi Drivers' Association. "We hear that there's a couple of medallion owners that have offered to sell at 425 and nobody's touched them."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
The current structure of the American taxi industry began in New York City when "taxi medallions" were introduced in the 1930s. Taxis were extremely popular in the city, and the government realized they needed to make sure drivers weren't psychopaths luring victims into their cars. So, New York City required cabbies to apply for a taxi medallion license. Given the technology available in the 1930s, It was a reasonable solution to the taxi safety problem, and other cities soon followed suit. But their scarcity has made taxi medallions the best investment in America for years. Where they exist, taxi medallions have outperformed even the Standard & Poor's 500-stock index. In Chicago, their value has doubled since 2009. The medallion stakeholders are many and deep pockets run this market. The system in Chicago and elsewhere is dominated by large investors who rely on brokers to sell medallions, specialty banks to finance them and middle men to manage and lease them to drivers who own nothing at all. Together, they're fighting to protect an asset that was worth about $2.4 billion in Chicago last year. "The medallion owners seem to be of the opinion that they are entitled to indefinite appreciation of their asset," says Corey Owens, Uber's head of global public policy.. "The taxi medallion in the U.S. was the best investment you could have made in the last 30 years. Will it go up forever? No. And if they expected that it would, that was their mistake."
Don't invest in and artificially scarce commodity.
Why are medallions even sold as an asset, instead of leased from the city government? It just creates a vehicle for private rent-seeking and speculation. Some Slashdot users have tried to answer this in comments to earlier stories about Uber by treating a medallion as a share of the city's curbside "real estate". I can sort of see this, but why isn't it taxed like any other commercial real estate?
It sounds to me that even without Uber, the taxi system was poised on the point of a precipice. The Taxi industry is not a stock market and treating it like one is not sustainable.
Also for a long time this system has be renowned for only attracting the sketchiest drivers, so it obviously was not working at all.
Troll is not a replacement for I disagree.
WTF? Either he doesn't really own 100 medallions (and his bank does), or he considers having "only" 30 M$ the same as being bankrupt.
He reminds of a scene from "The Queen of Versailles" (http://www.imdb.com/title/tt2125666/). Some 50 year old lady was complaining that last year "she owned 10 multi-million-dollar houses", and that now, she hasn't anything left.
I'm at a loss to understand why the taxi companies don't come up with their own app. They could legitimately claim that their drivers are not crazy wackos that drive run-down Chevy Vegas or something. I mean, the slogan for Uber and Lyft is "normal people in their crappy cars swinging by if they can", right? I rarely take cabs, and don't think I'd ever call Uber. It seems to me taxi regulation is a good thing. We don't let just any joker with a subway train to ride down the rails picking people up when he feels like it. Don't you want to be sure that the car you get it is maintained, driver vouched for and accountable to someone, the cost calculated and constant? It's all bizarre to me.
Now you kids over there, off my lawn!
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that a fundamentally corrupt system is taking a little pain? They aren't even close to the woodshed yet.
There is no reason for medallions to exist any longer. The very easy solution to this is a) require a different class license for hired (hailed or called) car drivers and b) require the use of special plates (many already require a TX- type plate). I'm not even sure a uniform color is really "required" given the presense of the "taxi (un)occupied" roof top display though at this point I think yellow (at least in NYC) is so ingrained it may be a disadvantage to differentiate a hailed car.
Shockingly, the first two of my requirements already exist in most places. So again, why are we still dealing in the corrupt medallion business?
The medallion owners, and they show their appreciation to the city government in an appropriate fashion.
Same reason they don't allow some stores (in the US, typically liquor stores or car dealers) to open on Sundays. It's all about protecting the incumbents from a new entrant who wants to increase their market share and doesn't mind that the existing businesses would have to start caring about their customers.
Demand for rides is highly variable depending on tourist season, holidays, weather and sports. Medallions can not scale to maximum demand while also allowing for affordable prices throughout the year. Everyone knows that trying to catch a taxi in NY is an unreliable nightmare and one should always have a backup transportation plan.
It's too bad really, as regulation is badly needed for companies like Lyft and Uber. Ideally, DMV would require a second, stricter written and road tests for people who are going to drive for money. Then points would be subtracted from driving record for both traffic violations and run ins with the law, including cheating on the fare. We need to try to prevent psycopaths from picking up passengers, but not with an an onerous system based on scarcity.
Who said anything about $1m per year. You buy a medallion, you drive the taxi for x years, you sell the medallion (Or you lease / work for someone with a medallion etc).
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It seems the summary is a lost art here. At near 450 words, this is no longer a summary. Please /. if you cannot summarize the subject within a single paragraph with a few links forget it. There is no need to make the summary a thesis.
Achille Talon
Hop!
If there's no artificial scarcity, then no it's not a monopoly, but then what purpose do the medallions serve? You do realize that Uber started with all full-time drivers, right? Real-time dispatch of "livery service" cars: the drivers are permitted just like taxi drivers, but the cars (usually Towncars) aren't technically taxis.
I'm all for a "chauffer's license" (as its called in many states): a specific commercial drivers license required to drive others for money, taxi or no.
You do realize many/most taxi drivers are part time, right? The normal system in most places means only the most successful drivers actually own a taxi. The rest rent by car by the calendar day, and pay a hefty sum for that. The result is it's normal to try to stay awake for as much of that 48 hours as possible, as it takes many hours of driving just to cover the fixed daily cost of the taxi, then sleep for a day or two, then repeat. This is not a system geared towards safety!
Socialism: a lie told by totalitarians and believed by fools.
Over 45 years? Especially if driven by two different family members on different shifts? 16 hours a day times 6 days a week times 52 weeks a year times 45 years is about 225,000 hours. I suspect taxis can make far more than $4 an hour, enough to cover gas, vehicle maintenance/repair/replacement, a financed medallion payment, and a meager living for the family.
This assumes it's a family medallion. The ones sold today for that much are rented to the drivers and operated 24 hours a day 7 days a week.
It doesn't hurt to be nice.
Hundred of thousands dollars for mere right to operate a taxi car is nonsense. Anyone who has such money has better things to do, like lending it to others. Such lenders are rentier and don't contribute useful work to society. It DOES make sense to test possible taxi drivers wrt safety concerns but medallion system doesn't achieve this goal. You can lend them to anyone and they can be inherited. Thus absolutely anyone can end up having one.
It's hilarious that the summary of this story uncritically accepts that the origin of taxi medallions was about "public safety." This is a lie and it's always been a lie. The system was about limiting competition. Pure and simple. The people in the industry want fewer people competing, because there's more profit for them. They made friends with the right politicians, who then introduced the system and controlled how the industry was "regulated." I put that word in quotes because it wasn't regulated in the sense that people believe. It was regulated to avoid competitors hurting incumbents operators. This is the way pretty much all regulation really works. (Look up "regulatory capture" if you're interested in how it works.) There is no legitimate reason to control the number of taxis. Period. I don't even see a valid reason to license them, but if it were about safety, licenses would be available to anyone who could meet certain safety and insurance requirements. I don't have much sympathy for the owners of the current medallions. They've had a government-granted license to print money, which is why these medallions have had value. It's time to let the market take over. The medallion system needs to die.
If we followed such "laws", you'd still have to use pay-phones instead of the cellular one in your pocket. And your car's speed would've remained limited to 4mph and you'd have to pay someone to walk in front of it with a red flag — or keep using a horse-drawn carriage.
But you are even more thoroughly full of it — because, though Uber may have a few billion, it is not Uber but rather the drivers, who sign up with them, that are breaking these local ordinances. None of them are billionaires.
In Soviet Washington the swamp drains you.
Expirable taxi licenses, granted by the government to anyone who passes a test and pays a fee would be government regulation and a part of the price of doing business.
The cost of the process would be transferred to the customers while the benefit would be reaped by both the customers, small business owners and in part general public through the ensured qualities of the drivers and their abilities which would be determined by the administered test.
And in many places that's exactly how it works! Taxis, Towncars, and limos all have the same sticker. But the sticker on the car has nothing at all to do with the quality of the driver. People keep not getting this in these Uber discussions. Taxis are only very rarely owned by their drivers - the drivers rent them by the day from the taxi company. The assurance of product quality you get from anything attached to the car is limited (especially if it's a medallion you can move form car to car - tat adds no value at all).
Special licensing for the drivers seems much more useful, and is already in place separate from "medallions" everywhere I've heard of. It's the drivers license to focus on, not some BS revenue scheme for the cars.
Socialism: a lie told by totalitarians and believed by fools.
Bull Crap! I don't taxi much, but I have on occassion when on vacation, and I don't think I've ever had a taxi ride under $15.
Let's see, I took a cab from my house to SF once, a total of about 12 miles and the ride cost me about $90 (plus I had to pay for the bridge fare).
I recently took a cab in the LA area from the Airport to a person's house only a couple miles away, and it was about $50 dollars. I was charged about $7 right off the top just for the fact that the ride started at the airport.
I took another cab in Seattle this past year, from our hotel near the airport to the cruise terminal and the fee was about $80 at least.
The closest I've come to getting charged what you said was in Las Vegas that was only a mile or two and it was $15. After finding out how short of drive it was, my wife and I walked back instead of catching the cab.
Don't know where the heck your riding cabs for $10 (with the tip included), but in my little cab'ing experience, I've never found one. I think they'd charge you that much for driving to the end of the block. Most cabs I've seen charge you a couple bucks before leaving the curb and to start the meter.
You know, people were panning germany for forbidding uber. But we do not have (as far as I can tell) a "medaillon" limit. All you need to be a legal taxi is :
* make a "taxischein" (driver license allowing you to transport people)
* Have insurance which allow commercial transportation of people
* Have a metered reader which the government checks ("geeicht")
None of which is an artificial scarcity like the medaillon mentionned.
And yet what do we see in the article here ? Artificial limitation in the country of the "free market" which are even worst than in Germany.
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